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ECONOMY: Fraser Institute calls for 15 percent flat tax rate
        (AlbertaIndex, January 8, Tuesday) --- Canadian taxpayers could complete their personal tax returns in about five minutes using a postcard-size form if Canada adopted a 15 per cent flat tax proposed in a new report released by The Fraser Institute.
        Canadians spend a significant amount of time, energy and money complying with Canada’s complicated tax system at an estimated cost of up to $30 billion annually, says Dr. Alvin Rabushka in his “In A Flat Tax for Canada”.
   
A large portion of these costs are due to the time and effort spent obtaining and providing receipts, preparing and submitting tax returns, and the services of professionals such as accountants and lawyers.

In the report, Dr. Rabushka, an internationally renowned expert on tax reform with the Hoover Institution at Stanford University, proposes an entirely new tax system based on a 15 per cent flat tax rate designed to collect the same amount of revenue as the government currently collects.

Reforming Canada’s income tax system using a flat tax of 15 per cent will make the tax code simple and less costly, as well as eliminating nearly all deductions, exemptions, and credits that complicate the current tax system.

On the personal income tax side, the existing four federal income tax rates are reduced to one low rate of 15 per cent. The same rate would also be applied to business income.

One of the most significant changes under the proposed flat tax is the full exemption of savings and investment from taxation. Income put back into the economy in the form of savings or investments would not be taxed under the flat tax, which would encourage more savings and investment and lead to a more vibrant and wealthier economy. The changes would also make Canada much more attractive and competitive internationally.

“The flat tax would revolutionize the incentives for savings and investment, making Canada a beacon for investment in the industrialized world,” Rabushka said.

Rabushka also shows how the simplicity and fairness of the flat tax could easily be extended to the provinces. In order to maintain the same levels of revenue, provincial flat taxes would range from a low of 6.1 per cent in Newfoundland and Labrador to 15.5 per cent in Quebec. Western Canadian provinces would require some of the lowest provincial flat taxes with Alberta at 6.8 per cent, Saskatchewan at 7.5 per cent and British Columbia at 7.9 per cent.

Ontario would require a flat tax rate of 9.2 per cent. The result would be combined federal-provincial flat taxes ranging from 21.1 per cent in Newfoundland and Labrador to 30.5 per cent in Quebec.

“Replacing Canada’s personal and business income tax systems with a flat tax will save money and make everyone’s taxes easier to calculate,” Rabushka concludes.

“But more significantly, it will strengthen the Canadian economy and lead to an improved standard of living for all Canadians.”

“A Flat Tax for Canada” is a chapter from a forthcoming book on tax reform to be published later this year by The Fraser Institute.

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